Macau: Mass market gaming sector with positive outlook in the long-run

Accumulated gross gaming revenue for the first seven months of the year has totalled MOP 173.9 billion (US$ 21.5 billion), a 0.9 per cent decrease when compared to the same period last year.

Bernstein also estimated that VIP results dropped 14 per cent year-on-year in the second quarter of this year with mass market to have increased 12 per cent.
‘While GGR growth from late 2016 to mid-2018 was boosted by a strong VIP growth trend, we continue to view the industry as a secular growth story driven by relatively stronger Mass growth over the longer run,’ Bernstein stated.

According to the brokerage this dynamic became more apparent in the second half of 2018 as Macau experienced deceleration in VIP growth relative to Mass as higher-end customers were more impacted by concerns around the Chinese macro-economic environment, including decelerating growth of the Chinese economy, escalation of US-China trade war, and potential policy risks.

Curiously Bernstein also noted that in 2018/2019 there seems to have been a spike in anti-corruption operations by Chinese authorities, with corruption crackdowns in 2013 and 2014 having led to a large decline in gaming revenues at the time.

The brokerage also noted that in the second quarter of 2019 several consumer industry indicators saw a slow down in growth, such as indicators for the property market, airline travel, Hong Kong retail, and Macau visitation, mainly due to one-off events such as the large scale protests in Hong Kong.

‘However, in the long run, improvements in transportation infrastructure, continued growth of the premium consuming class in China and the opening and ramping up of new casino resorts will support long-term growth in Mass […] With strong premium consumer growth in China forecasted over the long-run, Macau’s secular growth story remains intact,’ Bernstein noted.